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UNITED NATIONS UNIVERSITY UNU-WIDER Agricultural Climate Change Impacts on Moroccan Agriculture and the Economy Including an Analysis of the Impacts of the Plan Maroc Vert (PMV) 9/29/2012 Ismail Ouraich Wallace E. Tyner UNITED

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Agricultural Climate Change Impacts on Moroccan Agriculture and the Economy Including an Analysis of the Impacts of the « Plan Maroc Vert (PMV) »

Ismail Ouraich Wallace E. Tyner

9/29/2012

UNITED NATIONS UNIVERSITY UNU-WIDER

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  • Motivation & Objectives
  • Moroccan economy: Stylized facts

▫ Agriculture and climate in Morocco

  • Analytical approach

▫ The Morocco computable general equilibrium (CGE) model

  • Description of data and scenario analysis

▫ Data and Regionalization structure ▫ Discussion of climate change impact scenarios

  • Results & Analysis
  • Conclusion

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Presentation outline

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  • Important backward and forward linkages:

climate change  Agriculture  Rest of the economy  Agriculture, etc.

  • Climate change impact studies on the

agricultural sector in Morocco limited:

▫ Few studies ▫ Data not up-to-date

  • Need for quantification of climate change

impacts on the economy for policymakers

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Motivation & Objectives

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Regional assessment of climate change impacts

  • n the agricultural sector in Morocco and its

economy-wide linkages by:

▫ Accounting for the interregional dynamics of climate change at the level of the administrative and economic regional unit ▫ Using well-established climate scenarios for Morocco, with and without adaptation

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Motivation & Objectives

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  • Share of agriculture in

▫ GDP is 19% (15% crop production and 4% food processing) ▫ Total employment is 43% ▫ Total rural employment is 78%

  • Agricultural production dominated by rainfed production

systems

▫ Irrigated land represents only 11% of total agricultural land ▫ Cereals occupy 68% of total arable land

  • Substantial share in trade

▫ Food exports 23% of total merchandise exports ▫ Food imports 11% of total merchandise import

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Moroccan economy: Stylized facts

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Evolution of agricultural GDP and per capita agricultural GDP in Morocco (1965-2009)

Source: Authors’ adaptation (based on World Bank Data, 2010)

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Agriculture and Climate in Morocco

Phase I Phase II Phase III

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  • Computable general equilibrium (CGE) model

▫ Based off IFPRI’s general framework (Logfren at al., 2002) and adapted by Dudu and Cakmak (2010)

  • Captures the Moroccan economy through 30 production

sectors, producing 30 commodities

▫ Agricultural production (10 activities), livestock (4 activities) ▫ Forestry & Fishery ▫ Industry and manufacture (including Food processing) (12 activities) ▫ Services (2 activités)

  • 2 representative households (rural and urban)
  • Government accounts and Rest of the World (ROW)

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Analytical approach

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  • Production is modeled based on the profit-maximization

assumption, subject to a production technology

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Analytical approach

Output (Fixed yield coefficients) Activity level (Leontief function) Value-added (CES function – primary factors) Labor Capital Fallow land Pasture land Irrigated land Rainfed land Intermediate input

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  • Households maximize utility s.t. a consumption

expenditure constraint and modeled via a Linear Expenditure System (LES)

▫ Utility function is of the “Stone-Geary” genre

  • Government collects taxes and receives

transfers from other institutions;

▫ No behavioral modeling of government

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Analytical approach

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  • Closure assumptions

▫ Consumer Price Index (CPI) is set to be the numeraire; whereas the Index of domestic producer prices (DPI) is flexible ▫ Exchange rate is flexible and foreign savings are fixed ▫ Share of investment is fixed ▫ Lastly, government savings fixed, with direct tax rates flexible

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Analytical approach

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  • The base data is from a social accounting matrix

(SAM) developed by the Dr. Rachid Doukkali of IAV/Hassan II (base year 2003);

▫ Modified to account for the adopted sectoral aggregation in the model, i.e. 30 sectors producing 30 commodities

  • Regional disaggregation is based on the

administrative and economic regions (AERs) in Morocco

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Data and Regionalization structure

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Legend Region Legend Region Tanger-Tétouan Chaouia-Ouardigha Gharb-Cherarda-Beni Hsan Grand Casablanca L'Oriental Rabat-Salé-Zemmour-Zaër Meknes-Tafilalet Taza-Taounate-Al Hoceima Tadla-Azilal Fès-Boulemane Souss-Massa-Draa Guelmim-Esmara* Marrakech-Tensift-Al Haouz Laayoune-Boujdour-Sakia El Hamra* Doukkala-Abda Oued Eddahaab – Lagouira*

15 Administrative and Economic Regions (AERs)

Source: Authors adaptation

Data and Regionalization structure

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  • Agricultural crop production is regionalized

based on regional production shares computed from Agricultural Census on Major Crop Production (2002-2003);

  • For the rest of the production sectors, we used

national statistics from:

▫ Agence de Développement Agricole (ADA); ▫ Haut Commissariat au Plan (HCP); ▫ Office Nationale de l’Electricite (ONE); ▫ Office des Changes (OC); ▫ Office Nationale des Pêches (ONP); ▫ Etc.

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Data and Regionalization structure

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  • Climate-induced yield impacts obtained from the

WB/Morocco/FAO study (2010)

  • Estimated for 50 crops under 4 time horizons and 2

SRES scenarios:

▫ “Baseline”(1976-2006), “2030” (2011-2040), “2050” (2041-2070) and “2080” (2071-2099); ▫ A2 and B2 using the HadCm3 GCM model

  • Yield impacts downscaled to a 10 km x 10 km grid-cells

compatible with the AEZs in Morocco;

▫ Favorable “FAV”, Intermediate “INTERM”, Unfavorable-Oriental “DEF- Or”, Unfavorable-South “DEF-Sud”, Mountain “MONT”, and Sahara “SAH”;

  • Impacts were estimated with and without CO2

fertilization effects, with confidence intervals capturing the average impact and the 10th and 90th percentiles of yield impacts;

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Climate change impacts: Data and Scenarios

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15 AERs 6 AEZs

Climate change impacts: Data and Scenarios

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Climate change impacts: Data and Scenarios

Summary of scenario analysis

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The PMV Strategy

  • Assistance and encouragement of private investment

▫ Public-Private partnerships (e.g. privatization of public and collectivity land, etc.)

  • Modernization of distribution circuits and enhanced

integration with local/international markets

  • Assistance in reconversion of land crop tenure from

cereals to high value-added crops (e.g. olive, tree fruits, etc.)

  • Intensification of production through better access to

agricultural inputs (e.g. fertilizer) and seed technology

  • Assistance in adoption of modern irrigation technology

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Climate change impacts: Data and Scenarios

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Climate change impacts: Data and Scenarios

Summary impact of productivity targets in the PMV strategy for major crops

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Climate change impacts: Projected yields

Projected yield impacts for selected crops by SRES scenarios – national average

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Climate change impacts: Projected yields

Projected yield impacts for selected crops by SRES scenarios – national average

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Macroeconomic accounts – No adaptation (%Change from BASE)

BASE A2_noCO2 Low Med High Consumption - C 272,986

  • 3.37%
  • 1.84%
  • 0.97%

Investment - I 133,622

  • 2.88%
  • 1.54%
  • 0.84%

Government - G 85,485

  • 1.91%
  • 1.01%
  • 0.53%

Exports - X 139,736

  • 0.85%
  • 0.44%
  • 0.22%

Imports - M

  • 153,254 -0.78%
  • 0.40%
  • 0.20%

Gross Domestic Product (GDP) 478,574

  • 3.07%
  • 1.66%
  • 0.88%

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Results & Analysis: Aggregate impacts

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  • Climate change has the potential to act as a

drag on the economy as a whole

▫ Agricultural sector and food processing industry particularly affected due to strong linkages between the two

  • Impacts can be significant, especially under the

worst case scenario

  • All macro indicators affected negatively 

contraction in the overall level of economic activity

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Results & Analysis: Aggregate impacts

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Impact of historical droughts on gross domestic product (GDP) – by sector

  • Severe droughts have had historically similar impacts on

the economy

▫ e.g. in the 1981 drought, GDP falls by -19% with agriculture

  • 43%, industry -11%, manufacturing -13% and services -

14%

  • Economy becoming more resilient with more decoupling
  • f rest of the economy from the agricultural sector

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Results & Analysis: Aggregate impacts

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Sectoral output (valued at output prices) – No adaptation (%Change from BASE)

BASE A2_noCO2 Low Med High Agriculture 75,813

  • 4.26%
  • 2.07%
  • 0.74%

Livestock 34,380

  • 1.74%
  • 0.47%

0.06% Forestry&Fishery 10,162

  • 4.54%
  • 2.58%
  • 1.48%

Dairy 5,856

  • 3.78%
  • 2.08%
  • 1.10%

Food processing 166,078

  • 4.74%
  • 2.54%
  • 1.38%

Industry and manufacture 544,386

  • 3.06%
  • 1.67%
  • 0.99%

Services 592,030

  • 3.83%
  • 2.09%
  • 1.14%

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Results & Analysis: Aggregate impacts

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Impact mostly negative on all sectors

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Households income – No adaptation (%Change from BASE)

BASE A2_noCO2 Low Med High National_Urban 344,485

  • 3.58%
  • 1.92%
  • 1.03%

National_Rural 95,838

  • 3.69%
  • 1.98%
  • 1.06%

National 440,323

  • 3.60%
  • 1.94%
  • 1.04%

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Results & Analysis: Aggregate impacts

Contractionary effects of climate change on the economic activity  Declining returns of factor of production due to lower productivity as captured by lower wages, rents  Decline in household income, coupled with price increases  declining household consumption

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Sectoral impacts – Agriculture, No adaptation

BASE A2_noCO2 Low Med High Agriculture 75,813

  • 4.26%
  • 2.07%
  • 0.74%

Employment Capital 26,771

  • 0.33%

0.15% 0.32% Labor 6,151

  • 0.09%

0.26% 0.48% LandIr 7,972

  • 1.20%
  • 0.20%

0.44% LandRf 11,153

  • 0.18%

0.39% 0.77% Trade Exports 13,810

  • 8.75%
  • 4.41%
  • 1.48%

Imports 13,739 47.82% 26.50% 14.44%

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Results & Analysis: Aggregate impacts

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BASE A2_noCO2 Low Med High Food processing 166,078 -4.74% -2.54% -1.38% Employment Capital 17,104 -9.31% -5.21% -2.86% Labor 5,029

  • 8.37% -4.65% -2.61%

Trade Exports 6,109

  • 9.80% -5.25% -3.33%

Imports 10,643 1.27% 0.56% 0.33%

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Results & Analysis: Aggregate impacts

Sectoral impacts – Food processing, No adaptation

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  • Substantial impact on agriculture and food

processing

▫ Output falls by -0.8% to -4.3% for agriculture (crop production) and -1.4% to -5% for food processing

  • As marginal productivity of main factors of

production falls

▫ For labor and rainfed land in agriculture  substitute away for more capital and irrigated land ▫ For food processing  capital and labor intensive, thus lower productivity induces lower demand

  • Severe impacts on trade accounts

▫ Exports fall by -9% and -10%; whereas imports increase by 48% and 1.3% for both sectors respectively under the worst case scenario

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Results & Analysis: Aggregate impacts

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Macroeconomic accounts – with adaptation (%Change from BASE)

BASE B2_wCO2 Low Med High Consumption - C 272,986 1.76% 2.95% 3.62% Investment - I 133,622 0.62% 1.51% 2.00% Government - G 85,485 0.68% 1.27% 1.62% Exports - X 139,736 2.18% 2.70% 2.94% Imports - M

  • 153,254

1.99% 2.46% 2.69% Gross Domestic Product (GDP) 478,574 1.30% 2.33% 2.91%

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Results & Analysis: Aggregate impacts

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Sectoral output – with adaptation (%Change from BASE)

BASE B2_wCO2 Low Med High Agriculture 75,813 5.57% 7.65% 8.68% Livestock 34,380 2.03% 2.64% 2.96% Forestry&Fishery 10,162 0.29% 1.55% 2.29% Dairy 5,856 0.60% 1.82% 2.47% Food processing 166,078 0.56% 2.00% 2.85% Industry and manufacture 544,386 0.76% 1.50% 1.90% Services 592,030 1.33% 2.48% 3.14%

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Results & Analysis: Aggregate impacts

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Sectoral impacts – Agriculture, with adaptation

BASE B2_wCO2 Low Med High Agriculture 75,813 5.57% 7.65% 8.68% Employment Capital 26,771 -0.50% -0.46% -0.56% Labor 6,151 0.01% 0.19% 0.20% LandIr 7,972 14.91% 17.94% 19.40% LandRf 11,153 11.26% 13.03% 13.90% Trade Exports 13,810 13.69% 19.01% 21.68% Imports 13,739 14.93% 1.80% -6.10%

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Results & Analysis: Aggregate impacts

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BASE A2_noCO2 Low Med High Food processing 166,078 0.56% 2.00% 2.85% Employment Capital 17,104 1.41% 4.43% 6.24% Labor 5,029 1.79% 4.48% 6.09% Trade Exports 6,109 0.77% 3.07% 4.48% Imports 10,643 2.94% 2.72% 2.50%

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Results & Analysis: Aggregate impacts

Sectoral impacts – Food processing, with adaptation

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  • Positive impact on agriculture and food

processing

▫ Output increases by 6% to 9% for agriculture (crop production) and 0.6% to 3% for food processing

  • Driven primarily by projected yield gains under

the PMV strategy

▫ Higher yields  higher productivity for factors of production

  • As factor productivity increases  demand in

each sector increases for factor according to factor-intensity

▫ In agriculture  decrease in demand for capital as demand for labor, irrigated land and rainfed land become more productive

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Results & Analysis: Aggregate impacts

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  • Substantial improvement in the trade balance

▫ Agricultural trade improves substantially as exports surge increasing by 14% to 22% ▫ Food processing follows a similar pattern where exports increase by 1% to 4.5%

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Results & Analysis: Aggregate impacts

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  • Climate change impacts, under a no-adaptation

scenario, can be negative and substantial ▫ Agriculture and food processing particularly affected

  • Impacts are large enough to act as drag on the overall

level of economic performance

  • The PMV strategy could hold some elements of answer

to adapt to projected climate change impacts ▫ But, overall success will depend highly on the feasibility of the investment program and the ability to translate the productivity targets into reality(???)

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Conclusion